Correlation Between Varun Beverages and Shradha Infraprojects

Can any of the company-specific risk be diversified away by investing in both Varun Beverages and Shradha Infraprojects at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Varun Beverages and Shradha Infraprojects into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Varun Beverages Limited and Shradha Infraprojects Limited, you can compare the effects of market volatilities on Varun Beverages and Shradha Infraprojects and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Varun Beverages with a short position of Shradha Infraprojects. Check out your portfolio center. Please also check ongoing floating volatility patterns of Varun Beverages and Shradha Infraprojects.

Diversification Opportunities for Varun Beverages and Shradha Infraprojects

0.82

Correlation Coefficient

Varun Beverages  Shradha Infraprojects

Very poor diversification

The 3 months correlation between Varun and Shradha is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and Shradha Infraprojects Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shradha Infraprojects and Varun Beverages is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Varun Beverages Limited are associated (or correlated) with Shradha Infraprojects. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shradha Infraprojects has no effect on the direction of Varun Beverages i.e., Varun Beverages and Shradha Infraprojects go up and down completely randomly.

Pair Corralation between Varun Beverages and Shradha Infraprojects

Assuming the 90 days trading horizon Varun Beverages Limited is expected to generate 0.83 times more return on investment than Shradha Infraprojects. However, Varun Beverages Limited is 1.21 times less risky than Shradha Infraprojects. It trades about -0.09 of its potential returns per unit of risk. Shradha Infraprojects Limited is currently generating about -0.16 per unit of risk. If you would invest  62,410  in Varun Beverages Limited on December 26, 2024 and sell it today you would lose (10,695) from holding Varun Beverages Limited or give up 17.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Varun Beverages Limited  vs.  Shradha Infraprojects Limited

Varun Beverages

Risk-Adjusted Performance

Very Weak

Over the last 90 days Varun Beverages Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Shradha Infraprojects

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shradha Infraprojects Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Varun Beverages and Shradha Infraprojects

The main advantage of trading using opposite Varun Beverages and Shradha Infraprojects positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Varun Beverages position performs unexpectedly, Shradha Infraprojects can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Shradha Infraprojects will offset losses from the drop in Shradha Infraprojects' long position.

The idea behind Varun Beverages Limited and Shradha Infraprojects Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Insider Screener module to find insiders across different sectors to evaluate their impact on performance.